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FAB Universal Corp Stock Upgraded (FU)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

NEW YORK (
TheStreet)
-- FAB Universal (AMEX:
FU) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

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Highlights from the ratings report include:

FU's very impressive revenue growth greatly exceeded the industry average of 2.4%. Since the same quarter one year prior, revenues leaped by 2572.5%. Growth in the company's revenue appears to have helped boost the earnings per share.

FU's debt-to-equity ratio is very low at 0.03 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.43, which illustrates the ability to avoid short-term cash problems.

44.28% is the gross profit margin for FAB UNIVERSAL CORP which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, FU's net profit margin of 13.27% compares favorably to the industry average.

The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Media industry and the overall market on the basis of return on equity, FAB UNIVERSAL CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.

In its most recent trading session, FU has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.

FAB Universal Corp. engages in the distribution of digital entertainment products and services worldwide. The company operates in three segments: Wholesale, Retail, and Kiosk/Licensing. FAB Universal has a market cap of $98.4 million and is part of the technology sector and computer software & services industry. Shares are up 47.5% year to date as of the close of trading on Friday.